Joanne Greenaway, Professional Support Lawyer, Herbert Smith LLP
The English Court of Appeal has confirmed that the court has power to enter judgment in terms of a declaratory award under section 66 of the Arbitration Act 1996 (AA 1996).
In West Tankers Inc v Allianz SpA and another  EWCA Civ 27 (www.practicallaw.com/4-517-4639), Toulson LJ held that section 66 should be interpreted to enable the courts to give judicial force to an award on the same footing as a judgment not just by normal forms of execution, but also other means (such as recognising that the award gives rise to an issue estoppel or res judicata). For more detail on the case, see Legal update, Court of Appeal confirms declaratory awards can be enforced under section 66 Arbitration Act 1996 (www.practicallaw.com/6-517-4394).
The Court of Appeal's keenly awaited decision has affirmed the English courts' pro arbitration stance, endorsing an arbitral award in the face of a possible inconsistent Italian judgment. It has upheld Field J's decision at first instance in which the court enforced a declaratory arbitral award under section 66 of the AA 1996. It remains unclear, however, whether the resulting judgment could be used to prevent the recognition of any inconsistent foreign judgment in England (under Article 34 of the Brussels Regulation (www.practicallaw.com/2-205-5103)).
The decision provides a possible alternative to the anti-suit injunction that the European Court of Justice ruled out in its landmark 2008 decision in this long-running case. The ECJ declared that anti-suit injunctions should not be available to prevent proceedings in other European member state courts being brought in breach of an arbitration agreement. The Court of Appeal now goes some way to ensuring that arbitration agreements will be upheld.
Toulson LJ provides interesting clarity on the scope of section 66. In particular, he confirmed that the phrase "enforced in the same manner as a judgment to the same effect" would allow the court to give leave for a declaratory award to be enforced as a judgment, which could then be entered in the terms of the award. Even a negative declaratory award, provided the terms of the award are sufficiently clear – such as the declaration of non-liability in this case – could be enforced in this way "in an appropriate case", that is, because this might assist in securing the primacy of the award. In reaching this conclusion he demonstrated an appreciation of the need for courts to support arbitration to uphold the efficacy of awards.
However, whilst the judgment itself turns on the interpretation of the statutory provision, it is the wider ramifications in the broader arena of policy that will be more closely scrutinised. Toulson LJ did not specifically confirm that the resulting judgment was a judgment for the purposes of Article 34 of the Brussels Regulation. This would depend on whether it fell within the arbitration exemption in the Regulation, which is still unclear pending reform. However, the rationale behind the judgment of Field J was that judgment entered in terms of the award could enable West Tankers to secure the benefit obtained in the arbitration in the face of a potential conflicting judgment. The point remains to be decided if and when the insurers seek to enforce a resulting Italian judgment in the English courts under the Regulation.
Whilst the Court of Appeal provides a degree of comfort and clarification, the reform of the Brussels Regulation reform is still eagerly anticipated. It is hoped that the revised Regulation and, particularly, the arbitration exception within it, will be conclusive and clarify how arbitration agreements are to be protected. If, indeed, the judgment in this case were to be considered an arbitration-related judgment within the scope of the exemption, this decision would not have its desired effect.
What is clear is that there is no perfect solution. As a result of this ruling, parties facing parallel arbitration and court proceedings may well consider it worthwhile to race to obtain a substantive ruling. This could give rise to procedural abuses on both sides as each party seeks to slow down the proceedings commenced by the other – a situation that is not conducive to the expeditious resolution of disputes.